Commercial firms fight back in a post-boom world

Exor is an owner that looks longer term,but like any investor,liquidity is important to them, he said. To increase the chance of obtaining this liquidity,either through an IPO or from private financing, Rufrano is making the firm more financially open. He has a five-year time horizon 8211; the term of his contract with Cushman.

Jones Lang LaSalle,based in Chicago and ranked fourth in the world,recently posted a profit after several losing quarters and began a four-year plan in January to increase its New York-area revenue by 50 per cent,in part by hiring brokers away from other companies. Colliers International,which has a global presence but is less well known in the United States,is hoping that a recent move to consolidate its many separate franchises under a single name will help it gain market share and a reputation as a major player in New York.

At Cushman,Rufrano faces an uphill battle. While the slowdown in the economy has affected brokerage firms across the board,the firm has been hit particularly hard. In 2009,for example,when Cushman posted a loss 8211; which it attributed partly to one-time charges like the relocation of its worldwide headquarters in New York 8211; CB Richard Ellis,the largest global brokerage firm,posted a 33 million profit.

One main reason for Cushmans troubles may be a lack of top-down management,those familiar with the firm said. Bruce E. Mosler,who stepped down as chief executive in January,was a powerful broker in his own right and the firm is largely organised into teams that are focused around successful deal makers. These teams may compete with one another for commissions.

In comparison,firms like CB Richard Ellis and Colliers International favor grouping brokers together on an ad hoc basis. While there are independent brokerage teams at Jones Lang LaSalle,employees there were compensated with salaries and bonuses instead of commissions until seven years ago,helping establish a more unified culture,the firm says.

Having individual teams is constraining, said Mitchell E. Rudin,president and chief executive officer of the tristate region of CB Richard Ellis. Instead,we select teams for a particular assignment,mixing and matching to bring together the best resources. While this model serves the clients,it also cuts down on friction between brokers,he said.

There is also the issue of Cushmans ownership structure. While it is private,its majority stakeholder,Exor,the investment arm of the Italian Agnelli family,is public. Exor spent 563 million to acquire a 67.5 per cent position in Cushman in December 2006,at the height of the market. It later increased its position to 72 per cent,and is growing anxious to see its investment turn the corner.

The hiring of Rufrano in February indicates that Exor is preparing an exit strategy,some analysts said. Rufrano was most recently the chief executive of Centro Properties,one of Australias largest real estate firms,where he was credited with shoring up the public companys abysmal balance sheet.

In addition to increasing transparency at Cushman by instituting the same financial disclosures as a public company,Rufrano is working to unify the firms management structure. This includes de-emphasising geographic barriers so that the leasing team in London,for example,can coordinate more closely with colleagues in South America and New York.

The problem with Cushman is that they are not as big as CB Richard Ellis or Jones Lang LaSalle globally,but they arent small either, said Brandon Dobell,a principal at the investment firm William Blair amp; Company in Chicago. An IPO is the most likely possibility for the firm,said Dobell,because private financing is hard to come by and a merger is unlikely as there are few players in the market with whom it would make sense.

As Cushman determines its future,Jones Lang LaSalle,which posted a profit of 200,000 in the first quarter of this year compared with a 61 million loss in the same period last year,is focused on increasing revenue.

When I joined seven years ago, said Peter G. Riguardi,president of the firms New York operations,area revenue was below 20 million and it is now more than 120 million. We plan to grow this by another 50 per cent over the next four years to bring it to 200 million through a combination of improving market conditions and strategic hiring.

The firm recently made a splash when it hired away some of Cushmans most prolific deal makers,including much of the capital markets group. The team of Scott Latham,Richard Baxter,Jon Caplan and Ron Cohen was behind some of the largest transactions of the boom era.

Another firm that is undergoing a major shift is Colliers International. The second-largest global brokerage firm,it is largely unknown in the United States. This is partly because of its structure as a loose network of franchises that operate largely independently. Through acquisitions and management changes,the publicly traded FirstService Corporation in Toronto,which owns a number of the Colliers franchises,is consolidating these firms under the Colliers International brand. Firms that decline to join will be forced to drop the Colliers moniker.

We are in a position where we cant lose any more market share, said Mark A. Jaccom,the chief executive of Colliers for the tristate region. We can only gain. And we plan to take our competitors market share out from under them.

Jaccom and his team are building up a consulting group and plan to hire 25 or so additional brokers. We want our brokers to mine their relationships,to hold our clients hands throughout the entire process, he said. Our business is going to be much more sophisticated,where we do an entire playbook and work on everything from workplace solutions to IT

So far a consolidated Colliers has received mixed reviews. David Gold,a senior equity analyst at Sidoti amp; Company,said he believed it will be the firm to watch over the next three years. They used the downturn wisely to grow,and I wouldnt bet against them.

Others dismiss the move as nothing more than a name change: It takes years to build a brand, said Mitchell S. Steir,chief executive officer of Studley,a New York-based brokerage firm. It cant be invented overnight by slapping a new name on a collection of different firms with different philosophies.

Whatever the chances of success,industry insiders say it is clear that changes are afoot that could lead to power shifts in the industry. Times of turmoil often lead to consolidation and strategy shifts, Dobell said. It will be interesting to see how it all plays out.